A business credit card can be used by anyone who has business expenses. This includes sole proprietors, freelancers, large businesses, and anyone else who would like to keep personal expenses separate from work purchases.
7 things to know about business credit cards
Before you sign up for a new credit card, there are some things you should know about how a business credit card works, including their benefits and limitations.
- Business credit is different than personal credit
Any credit card use or debt accumulated by a business contributes to a business credit score. Just like a personal credit score, a good score indicates that your business is responsible for their debts and pays them back in a reasonable amount of time. Even if you have fantastic personal credit, you need to build up your company credit score. Business owners who want to make large purchases might have to start with a lower credit limit and fewer rewards. As you build up credit history through your business account, you’ll be able to increase your spending power and apply for credit cards with better rewards.
- Business cards do not have the same protection as personal cards
Most companies will protect their credit card customers from fraud or even unsatisfactory purchases. Business credit cards do not always offer this protection. Make sure you review the differences between personal protection and business protection, even if you go with the same company for both of your credit cards.
- Business credit cards vary from country to country
Not every credit card is valid in every country, and rates, rewards, and terms vary greatly from location to location. In addition, using a credit card issued in one country may have high fees associated with using it in another location. Rules about tax write-offs and credit reporting can also vary based on where you use your card. In order to get a credit card, you must live in the Country providing the card. For example, to get a Canadian business credit card, you must have a Canadian address. To apply for a United States card, you have to have a U.S. social security number.
- Terms may be more lenient on business credit cards
Credit card companies expect their customers to make larger purchases on their business credit cards and potentially need more time to pay them back. Because of this, most business credit cards have higher limits, longer grace periods without interest, and more flexible payment plans than personal credit cards. The higher limits are available because most banks take into consideration your business revenue rather than personal income to determine your limits. In addition to the higher spending limits, some business accounts allow 50-60 days before you start to accrue interest rather than a typical 30 day payoff period. With these lenient terms, watch out for higher annual fees.
- Almost anyone can get a business credit card
Contrary to what you might think, you don’t have to have a business license to apply for a business credit card. If you have any kind of work spending that you would like to keep separate from your own personal spending, you can use a business card to stay organized. Some companies do put limits on who can apply for a business card, or whether you qualify for lower interest rates. Some of these requirements include showing two years worth of business income or having low employee turnover.
- You’ll need good personal credit to get a business credit card
Even though your personal and business credit cards will be separate and will be reported separately to credit monitoring services, you need at least a decent personal credit score to be issued a business credit card. This is especially true if you are applying for a credit card with a high spending limit or low interest rates. Banks want to know that you are responsible and trustworthy before they give you access to borrowing money with almost no collateral.
- Business credit cards can make it easier to run your business
Many credit card companies offer rewards like travel points or cash back. Business credit cards are more likely to reward you with things that will help you grow your business. They also provide rewards on purchases that personal credit cards do not, including; phone bills, office supplies, and advertising. You can also write off some unexpected costs like credit card interest paid. Having a separate business card can also help you figure out your tax write offs. Many companies will send you an itemized list of write-offs, helping you save time and money by making sure you don’t forget anything. You can also get all of your employees a business credit card to allow them more autonomy in their purchasing, while still being able to keep track of their spending.
FAQs About Business Credit Cards
Can I get a Canadian credit card if I live in the UK?
In order to get a credit card in most countries, you must be a resident or citizen of that place. If you frequently travel between countries, you can use a card like the Halifax Clarity card that does not charge foreign exchange fees.
Why should I get a business credit card instead of a personal credit card?
A separate business credit card has several benefits. First, it helps keep your personal and work expenses separate and easier to organize. Business credit cards are also structured to work better for large business purchases and give rewards for business expenses like advertising.
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